THE EASTERN SUBURBS REAL ESTATE BUBBLE MAY SHRINK, BUT IT PROBABLY WON’T BURSTIf you live in the Eastern Suburbs of Sydney, it is actually quite a challenge to get through the day without someone mentioning the local property market and just how inaccessible it is.
For years now, median property prices in the East have continued to rise and rise, leading to the question on everyone’s lips: “When is the bubble going to burst?” Surely exponential growth is not a plausible market model when salaries are not rising accordingly, and the cost of living also grows stealthily higher?
Jodi Birch, a Residential Property Project Manager at BIS Oxford Economics, explains, “If we look at the quarterly median house prices in the East (defined as Randwick, Waverley, and Woollahra) over the last three years, growth has been consisently strong, although you can see a tapering off in annual growth to June 2017.”
She elaborates, “The June quarter median house price is actually lower than it was in March 2017 and December 2016, although we expect this to be revised upwards somewhat as more sales information is recorded from these quarters.”
Without further sales informa- tion, though, the numbers do seem to speak volumes: in September 2014, the median house price in the East was $1,913,000. The median continued to steadily rise, reaching its peak in December 2016 at $2,612,300. Since then, it looks as if it is beginning to drop off ever so slightly, with the median being $2,592,100 in March this year, and then, most recently, at $2,352,900 in June.
Birch confirms, “That said, we do expect prices to have peaked, with Sydney house prices overall expected to contract over the next two years.”
Principal of McCrindle, demographer Mark McCrindle, proffers another element to consider when it comes to housing prices: “Unsurprisingly, where population growth is strongest, house price rises are the highest. Sydney is growing fast, having averaged 1.8% per annum for the last five years. It will add almost two million to its population by 2037, which is the equivalent of adding a new Perth into Sydney.”
This being the case, younger people looking to buy into the housing market – especially in the Eastern Suburbs, where demand is very high – are increasingly looking to either rent elsewhere, move interstate, or, if they are lucky enough to have parents or family living in the East, to continue to live with their parents into adulthood.
Says McCrindle, “More than two thirds of local residents (66%) have considered moving out of Sydney, with a quarter of all Syd- neysiders (23%) saying they have seriously considered it. Addition- ally, while the ‘couple with kids’ household remains the most com- mon household type in Australia, making up 32% of Australia’s households, household structures are changing with a noticeable rise of the multi-generational household.
“This type of arrangement is a significant financial advantage for Gen Y’ers who may be saving $15,000 per year on rent alone by living with their parents. For mum and dad, however, retirement plans are delayed and retirement savings significantly decrease.”
No matter which way you look at it, the current Eastern Suburbs housing market is not really help- ing anyone, unless they already have property. Anyone else better bunker down with the parentals, move an hour out of the CBD, or hitch a ride to the hinterlands.